On 10 October 2019, the Gambling Commission (“Commission”) announced that it had reached a regulatory settlement with Petfre (Gibraltar) Limited, trading as Betfred ( “Betfred”) in relation to Betfred’s failure to carry out adequate anti-money laundering checks.
The Commission commenced an investigation into Betfred after it was notified that one of Betfred’s customers had been convicted of a £2 million fraud. The customer had opened multiple gambling accounts with a variety of operators in a very short period and had used the proceeds of the fraudulent conduct to make large deposits, incurring significant losses.
During the Commission’s investigation, it was established that the customer had deposited £210,000 of stolen money with Betfred over a 12-day period in November 2017. Of that sum, the customer lost £140,000.
Whilst Betfred had initially followed its policies in requesting source of funds information from the customer on two occasions in November 2017, the customer failed to provide the required information and was able to continue to play. This was caused by a shortcoming in Betfred’s control measures which raised significant concerns about the implementation of Betfred’s anti-money laundering policies and procedures.
The Commission found Betfred’s failure to follow source of funds procedures as part of its anti-money laundering policy to be a contravention of the Commission’s Licence Conditions and Codes of Practice (“LCCP”), specifically:
- Licence Condition 12.1.1, which requires that operators “conduct an assessment of the risks of their business being used for money laundering and terrorist financing” and “ensure that policies, procedures and controls are implemented effectively”.
- Ordinary Code Provision 2.1.2, which requires that operators “take into account the Commission’s advice on the Proceeds of Crime Act 2002”.
Betfred accepted shortcomings in the effectiveness of its anti-money laundering policies and procedures and has implemented improvements to prevent such failings reoccurring.
The regulatory settlement
As a result of the failings, Betfred has agreed as part of the regulatory settlement to:
- return £140,000 to the victim of the customer’s fraudulent conduct;
- pay £182,000 to the National Strategy to Reduce Gambling Harms in lieu of a financial penalty; and
- contribute £15,168.42 towards the costs of the Commission’s investigation.
In reaching the regulatory settlement, the Commission considered the following factors:
- Betfred was open and transparent in dealing with the Commission and disclosed material facts in a timely manner;
- there had been no repeated breaches of a similar nature and the breach was isolated;
- Betfred demonstrated insight into the breach and had taken action to prevent reoccurrence;
- Betfred’s failings did not arise from the lack of appropriate anti-money laundering policies, but rather a shortcoming in control measures;
- the customer was engaged with from a source of funds perspective; and
- Betfred agreed to divest the gross gambling yield relating to the failings, to contribute to the Commission’s investigative costs and to the publication of a statement by the Commission.
This regulatory settlement is further evidence of the strict approach to compliance being adopted by the Commission. The payment agreed is significant in circumstances where Betfred’s failings concerned only a single customer and where appropriate policies and procedures were in place (although not implemented effectively). It follows in the footsteps of a regulatory settlement with Platinum Gaming in respect of a single player who had been convicted of a £2 million fraud, in which case Platinum returned £629,420 to the fraudster’s victims and agreed to pay £990,200 in lieu of a financial penalty (you can read more about this here).
In this regard, the fact that the customer was able to gamble such a considerable amount of money in such a short time period appears to have been an aggravating factor. Operators must consider the appropriateness of triggers for source of funds checks, particularly, in the context of preventing customers from gambling substantial sums quickly and with due regard to affordability (as the Commission has set out in its recent guidance on Customer Interaction and latest Enforcement Report and in our article here). This has implications both from anti-money laundering and social responsibility perspectives.
As well as ensuring that anti-money laundering policies are appropriate, operators must carefully monitor whether such policies are fully implemented and effective in practice. There must be suitable control measures in place in order to do so.
The Commission’s public statement detailing the regulatory settlement is accessible here.
Co-authored by Nora Nigond.